
[Federal Register Volume 88, Number 244 (Thursday, December 21, 2023)]
[Notices]
[Pages 88433-88436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28040]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99189; File No. SR-MRX-2023-25]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, 
Section 6

December 15, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 5, 2023, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Rules at Options 7, Section 6, 
Ports and Other Services.\3\
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    \3\ The Exchange initially filed the proposed pricing changes on 
November 28, 2023 (SR-MRX-2023-23). On December 5, 2023, the 
Exchange withdrew that filing and submitted this filing.
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    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 88434]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Options 7, Section 6, Ports and 
Other Services. Specifically, the Exchange proposes to amend the 
monthly caps for SQF Ports \4\ and SQF Purge Ports.\5\ The Exchange 
also proposes to remove unnecessary rule text from Options 7, Section 6 
related to a technology migration. Both changes are explained below.
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    \4\ ``Specialized Quote Feed'' or ``SQF'' is an interface that 
allows Market Makers to connect, send, and receive messages related 
to quotes, Immediate-or-Cancel Orders, and auction responses to the 
Exchange. Features include the following: (1) options symbol 
directory messages (e.g., underlying and complex instruments); (2) 
system event messages (e.g., start of trading hours messages and 
start of opening); (3) trading action messages (e.g., halts and 
resumes); (4) execution messages; (5) quote messages; (6) Immediate-
or-Cancel Order messages; (7) risk protection triggers and purge 
notifications; (8) opening imbalance messages; (9) auction 
notifications; and (10) auction responses. The SQF Purge Interface 
only receives and notifies of purge requests from the Market Maker. 
Market Makers may only enter interest into SQF in their assigned 
options series. Immediate-or-Cancel Orders entered into SQF are not 
subject to the (i) Order Price Protection, Market Order Spread 
Protection, and Size Limitation Protection in Options 3, Section 
15(a)(1)(A), (1)(B), and (2)(B) respectively, for single leg orders, 
or (ii) Complex Order Price Protection as defined in Options 3, 
Section 16(c)(1) for Complex Orders. See Supplementary Material 
.03(c) to Options 3, Section 7.
    \5\ SQF Purge is a specific port for the SQF interface that only 
receives and notifies of purge requests from the Market Maker. 
Dedicated SQF Purge Ports enable Market Makers to seamlessly manage 
their ability to remove their quotes in a swift manner. The SQF 
Purge Port is designed to assist Market Makers in the management of, 
and risk control over, their quotes. Market Makers may utilize a 
purge port to reduce uncertainty and to manage risk by purging all 
quotes in their assigned options series. Of note, Market Makers may 
only enter interest into SQF in their assigned options series. 
Additionally, the SQF Purge Port may be utilized by a Market Maker 
in the event that the Member has a system issue and determines to 
purge its quotes from the order book.
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    Today, MRX assesses $1,250 per port, per month for an SQF Port as 
well as an SQF Purge Port. Today, MRX waives one SQF Port fee per 
Market Maker per month. Also, today, SQF Ports and SQF Purge Ports are 
subject to a monthly cap of $17,500, which cap is applicable to Market 
Makers.
    At this time, the Exchange proposes to increase the SQF Port and 
SQF Purge Port monthly cap fee of $17,500 per month to $27,500 per 
month. The Exchange is not amending the $1,250 per port, per month SQF 
Port and SQF Purge Port fees and the Exchange would continue to waive 
one SQF Port fee per Market Maker per month. As is the case today, the 
Exchange would not assess a Member an SQF Port or SQF Purge Port fee 
beyond the monthly cap once the Member has exceeded the monthly cap for 
the respective month. Despite increasing the monthly cap for SQF Ports 
and SQF Purge Ports from $17,500 per month to $27,500 per month, the 
Exchange will continue to offer Members the opportunity to cap their 
SQF Port and SQF Purge Port fees so that they would not be assessed 
these fees beyond the cap. Further, an MRX Market Maker requires only 
one SQF Port to submit quotes in its assigned options series into MRX. 
An MRX Market Maker may submit all quotes through one SQF Port and 
utilize one SQF Purge Port to view its purge requests. While a Market 
Maker may elect to obtain multiple SQF Ports and SQF Purge Ports to 
organize its business,\6\ only one SQF Port and SQF Purge Port is 
necessary for a Market Maker to fulfill its regulatory quoting 
obligations.\7\
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    \6\ For example, a Market Maker may desire to utilize multiple 
SQF Ports for accounting purposes, to measure performance, for 
regulatory reasons or other determinations that are specific to that 
Member.
    \7\ MRX Market Makers have various regulatory requirements as 
provided for in Options 2, Section 4. Additionally, MRX Market 
Makers have certain quoting requirements with respect to their 
assigned options series as provided in Options 2, Section 5. SQF 
Ports are the only quoting protocol available on MRX and only Market 
Makers may utilize SQF Ports. The same is true for SQF Purge Ports.
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    The Exchange proposes to remove the italicized language in Options 
7, Section 6 related to a technology migration that took place in 2022. 
In 2022, MRX filed a pricing change \8\ to permit Members to request 
certain duplicative ports at no additional cost, from November 1, 2022 
through December 30, 2022, to facilitate a technology migration. The 
rule text related to the 2022 technology migration is no longer 
necessary because the migration is complete and the pricing is no 
longer applicable. At this time, the Exchange proposes to remove this 
rule text.
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    \8\ See Securities Exchange Act Release No. 96120 (October 21, 
2022), 87 FR 65105 (October 27, 2022) (SR-MRX-2022-21) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Options 7 in Connection With a Technology Migration).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed pricing change to increase the monthly cap applicable 
to SQF Ports and SQF Purge Ports is reasonable in several respects. As 
a threshold matter, the Exchange is subject to significant competitive 
forces in the market for options securities transaction services that 
constrain its pricing determinations in that market. The fact that this 
market is competitive has long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \11\
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    \11\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \12\
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    \12\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
Within this environment, market participants can freely and often do 
shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules.
    The proposed pricing change to increase the SQF Port and SQF Purge 
Port monthly cap from $17,500 per month to $27,500 per month is 
reasonable because despite the increase in the monthly cap, the 
Exchange will

[[Page 88435]]

continue to offer Members the opportunity to cap their SQF Port and SQF 
Purge Port fees so that they would not be assessed these fees beyond 
the cap. Additionally, an MRX Market Maker requires only one SQF Port 
to submit quotes in its assigned options series into MRX. An MRX Market 
Maker may submit all quotes through one SQF Port and utilize one SQF 
Purge Port to view its purge requests. While a Market Maker may elect 
to obtain multiple SQF Ports and SQF Purge Ports to organize its 
business,\13\ only one SQF Port and SQF Purge Port is necessary for a 
Market Maker to fulfill its regulatory quoting obligations.\14\
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    \13\ For example, a Market Maker or may desire to utilize 
multiple SQF Ports for accounting purposes, to measure performance, 
for regulatory reasons or other determinations that are specific to 
that Member.
    \14\ MRX Market Makers have various regulatory requirements as 
provided for in Options 2, Section 4. Additionally, MRX Market 
Makers have certain quoting requirements with respect to their 
assigned options series as provided in Options 2, Section 5. SQF 
Ports are the only quoting protocol available on MRX and only Market 
Makers may utilize SQF Ports.
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    The Exchange's proposed pricing change to increase the SQF Port and 
SQF Purge Port monthly cap from $17,500 per month to $27,500 per month 
is equitable and not unfairly discriminatory because the Exchange would 
uniformly not assess any Market Makers that exceeded the proposed 
monthly cap any SQF Port and SQF Purge Port fees for that month beyond 
the cap. Market Makers are the only market participants that are 
assessed SQF Port and SQF Purge Port fees because they are the only 
market participants that are permitted to quote on the Exchange.
    The Exchange's proposal to remove the italicized language in 
Options 7, Section 6 related to a technology migration that took place 
in 2022 is reasonable, equitable and not unfairly discriminatory 
because the rule text related to the technology migration is no longer 
necessary because the migration is complete and the fees are no longer 
applicable. No Member is subject to the pricing described for the 2022 
technology migration.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intermarket Competition
    The proposal does not impose an undue burden on intermarket 
competition. The Exchange believes its proposal remains competitive 
with other options markets who also offer order entry protocols. The 
Exchange notes that it operates in a highly competitive market in which 
market participants can readily favor competing venues if they deem fee 
levels at a particular venue to be excessive. In such an environment, 
the Exchange must continually adjust its fees to remain competitive 
with other exchanges. Because competitors are free to modify their own 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which fee changes in this market may impose any burden on competition 
is extremely limited.
Intramarket Competition
    The Exchange's proposed pricing change to increase the SQF Port and 
SQF Purge Port monthly cap from $17,500 per month to $27,500 per month 
does not impose an undue burden on competition because the Exchange 
would uniformly not assess any Market Makers that exceeded the proposed 
monthly cap any SQF Port and SQF Purge Port fees for that month beyond 
the cap. Market Makers are the only market participants that are 
assessed SQF Port and SQF Purge Port fees because they are the only 
market participants that are permitted to quote on the Exchange. The 
Exchange's proposal to remove the italicized language in Options 7, 
Section 6 related to a technology migration that took place in 2022 
does not impose an undue burden on competition because the rule text 
related to the technology migration is no longer necessary because the 
migration is complete and the fees are no longer applicable. No Member 
is subject to the pricing described for the 2022 technology migration.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\15\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is: (i) necessary or appropriate in the public 
interest; (ii) for the protection of investors; or (iii) otherwise in 
furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MRX-2023-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-MRX-2023-25. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All

[[Page 88436]]

submissions should refer to file number SR-MRX-2023-25 and should be 
submitted on or before January 11, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-28040 Filed 12-20-23; 8:45 am]
BILLING CODE 8011-01-P


